In holiday sentiment, implied volatilities have pared back falling slightly lower compared to last weeks action. The dip has purported the range bound scenario that has been extended into the Christmas weekend, where traders will keep to their vacations and not spot action.
As a result, the differential remains lower on the weekly comparison with the longer term measure continuing on the path from the previous weeks decline. Incidentally, short term 3 month implieds continue to hover at the 7%, likely to stay there till the New Year is upon us. Market participants, the ones left in the market as of now, will shoot for consolidation between the 1.3100 and 1.3300 consolidation.
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Similar conditions are visible in the British pound as implied activity is lower on the weekly comparison. The longer term measure is similarily lower on the week with a narrowing of the differential reflective of the short term downturn. Although price action has been interesting in the past couple of sessions, calmness is blanketing the market, keeping fluctuations at a minimum. At this point, desks are not likely to erupt until price action breaks the topside resistance at the 1.9800 figure. Implieds on the 3-month are in line with euro counterparts, hovering on the 7% level, back from action that was seen about two weeks ago. As a result, spot action will remain resting between 1.9500 and 1.9800 for the time being.
USDJPY
Japanese yen vols remain supported heading into the holiday weekend as fundamental factors have contributed to yen weakness boosting the implied measure. Although the longer term measure, mimicking the 3-month implieds, continues to purport a tepid market reaction, the differential continues to remain proof positive, staying above the 0.75 figure in the histogram. The condition, and subsequent boost in activity, has been reflective of the near term move through technical resistance at 116, 117 and now 118 at the time of writing. The momentum should continue in the near term till markets close for the holiday on Friday. Afterwhich, market participants may see a slight downtick in activity, as usually occurs this time of year.
USDCAD
Looking weaker and weaker towards year end, Canadian dollar implieds are narrowing, compared to previous months. The longer term measure has ticked lower adding to the sentiment of a thick environment as the pair continues to move higher on US Dollar strength. As a result, the pair looks to continue on its current path, advancing in an orderly manner as the underlying spot is contained in a textbook technical channel. Purporting the sentiment is the positive differential which continues to remain slightly above the zero line, adding to notions that the currency is still alive and treading, although slowly. Any breakout from the current conditions will be sparked by penetration of near term resistance at 1.1600 with downside support at the 1.1300 figure.
USDCHF
Almost identical to the euro counterpart, the Swiss franc price action is responding to holiday market sentiment as volatilities remain constrained on the tepid intraday fluctuations. Coming back from the previous week, the differential has pulled back from spiking to a 1.5 point differential as the longer term measure contradicted with a tick lower. With 3-month near term implieds pricing similar above 7% figures, the currency is likely to remain in consolidation between 1.1900 and 1.2200. However, should we see another breakout above the technical figures, traders will expect a spike in implieds to levels seen around post Thanksgiving action.
AUDUSD
On a clear downtrend, the differential histogram between short and longer term implieds has narrowed but remained supported in the month of December. However, overall conditions havent visibly changed over the past week as the histogram remains above the 0.50 halfway mark even as the longer term visual measure has declined. Implieds on the short term, 3-months, are subsequently unchanged as with the other majors in the market. As a result, the underlying is likely to remain in the range bound situation between figures at 0.7900 and 0.7800. Notably, the implied pattern is mimicking patterns in November before the underlying spot made a significant move higher and may be suggestive of another anomalous advance.
